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Securities America 'in great spot' after Mutual of Omaha deal

Brokerage Mesirow to take on 401(k) fiduciary duties for Mutual of Omaha plans sold by SA reps

In a bid to provide reps with access to outsourced fiduciary services for retirement plans, Securities America Inc. has added Mutual of Omaha Insurance Co. as one of its retirement plan vendors.

While Mutual of Omaha has worked with hundreds of firms, the relationship its creating with Securities America is part of a bid to align with broker-dealers that want to participate in the insurer's fiduciary-outsourcing program. Under that program, functions such as investment menu design and fund selection are managed by Mesirow Financial Holdings Inc.

Essentially, the arrangement will let Securities America reps continue to maintain relationships with small 401(k) plans without dealing with the fiduciary liability that comes with making investment decisions for the plans. The small-plan market — 401(k)s with under $10 million in assets — adds up to a $750 billion, according to Cerulli Associates Inc.

Securities America currently has four such partnerships, aside from Mutual of Omaha, through which it can outsource retirement fiduciary services: Nationwide Mutual Insurance Co., Fidelity Investments and Ladenburg Thalmann Financial Services Inc., according to Paul Lofties, vice president of wealth management at Securities America.

He noted that outsourcing fiduciary duty lets the broker-dealer compete more effectively against other firms that may have specialist groups of 401(k)-focused advisers.

“It puts us in a great spot,” Mr. Lofties said. “Our advisers traditionally aren't the ones who have the staff, expertise or time to take on a fiduciary relationship. Through these product partners, the ability to outsource, compete and run the normal business is great.”

“This is where our niche is,” said Chuck Lombardo, president and chief executive of Retirement Marketing Solutions Inc., a Mutual of Omaha subsidiary. “Broker-dealers are concerned about advisers improperly providing advice. We have fiduciary protection, so firms feel comfortable with advisers presenting the product.”

Securities America is getting on board with Mutual of Omaha about seven months after Triad Advisors Inc. reached a similar agreement with the carrier. Both Securities America and Triad are owned by Ladenburg Thalmann.

The arrangement comes at a time when many in the financial services industry are awaiting the Labor Department's next move on its re-proposal of the “definition of ‘fiduciary'” rule, which will spell out who can act as a fiduciary to a retirement plan.

Mutual of Omaha plans sold by Securities America's reps will have access to fiduciary services via Mesirow in one of two ways.

Acting under Section 3(21) of the Employee Retirement Income Security Act of 1974, Mesirow can act as a co-fiduciary and share the fiduciary responsibility with the plan sponsor or the qualified representative who sold the plan. Under this arrangement, the manager — Mesirow — suggests a plan's fund offerings, which the adviser can help choose.

Alternatively, under a Section 3(38) investment management fiduciary service, the manager assumes discretionary authority for the plan and selecting its investment lineup. In this arrangement, reps who sold the plan have no investment input but can provide educational services and may be able to capture rollover business as participants leave the plan.

Melissa Hudson, national accounts director at Mutual of Omaha, noted that the insurer has targeted 10 broker-dealers for this relationship. Triad, Securities America and a third firm she would not name are among the broker-dealers that have signed up.

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